Describes the success and rapid growth of a real estate entrepreneurial firm, SOHO China. As the firm enters into a new stage, its founders, Xin Zhang and Shiyi Pan, consider their next big strategic move.
Swot Analysis of "SOHO China" written by Yasheng Huang, Jean Yang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Soho Shiyi facing as an external strategic factors. Some of the topics covered in SOHO China case study are - Strategic Management Strategies, Globalization, Innovation, Strategic planning and Global Business.
Some of the macro environment factors that can be used to understand the SOHO China casestudy better are - – increasing energy prices, increasing transportation and logistics costs, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models,
increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SOHO China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Soho Shiyi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Soho Shiyi operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of SOHO China can be done for the following purposes –
1. Strategic planning using facts provided in SOHO China case study
2. Improving business portfolio management of Soho Shiyi
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Soho Shiyi
Strengths SOHO China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Soho Shiyi in SOHO China Harvard Business Review case study are -
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Soho Shiyi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Soho Shiyi has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Innovation driven organization
– Soho Shiyi is one of the most innovative firm in sector. Manager in SOHO China Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Soho Shiyi is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to recruit top talent
– Soho Shiyi is one of the leading recruiters in the industry. Managers in the SOHO China are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Global Business industry
– SOHO China firm has clearly differentiated products in the market place. This has enabled Soho Shiyi to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Soho Shiyi to invest into research and development (R&D) and innovation.
Learning organization
- Soho Shiyi is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Soho Shiyi is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SOHO China Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Global Business field
– Soho Shiyi is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Soho Shiyi in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Soho Shiyi has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in SOHO China HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Soho Shiyi in the sector have low bargaining power. SOHO China has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Soho Shiyi to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Soho Shiyi has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Soho Shiyi to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Soho Shiyi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Soho Shiyi has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Superior customer experience
– The customer experience strategy of Soho Shiyi in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses SOHO China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SOHO China are -
Need for greater diversity
– Soho Shiyi has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Soho Shiyi has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Products dominated business model
– Even though Soho Shiyi has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - SOHO China should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study SOHO China, it seems that the employees of Soho Shiyi don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow decision making process
– As mentioned earlier in the report, Soho Shiyi has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Soho Shiyi even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Low market penetration in new markets
– Outside its home market of Soho Shiyi, firm in the HBR case study SOHO China needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As SOHO China HBR case study mentions - Soho Shiyi takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Soho Shiyi needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Soho Shiyi has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring
– The stress on hiring functional specialists at Soho Shiyi has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Soho Shiyi supply chain. Even after few cautionary changes mentioned in the HBR case study - SOHO China, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Soho Shiyi vulnerable to further global disruptions in South East Asia.
Opportunities SOHO China | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study SOHO China are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Soho Shiyi can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Soho Shiyi in the consumer business. Now Soho Shiyi can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Soho Shiyi to increase its market reach. Soho Shiyi will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Using analytics as competitive advantage
– Soho Shiyi has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study SOHO China - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Soho Shiyi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Soho Shiyi can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Soho Shiyi in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Soho Shiyi to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Developing new processes and practices
– Soho Shiyi can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Creating value in data economy
– The success of analytics program of Soho Shiyi has opened avenues for new revenue streams for the organization in the industry. This can help Soho Shiyi to build a more holistic ecosystem as suggested in the SOHO China case study. Soho Shiyi can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Soho Shiyi to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Soho Shiyi can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, SOHO China, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Soho Shiyi can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Soho Shiyi is facing challenges because of the dominance of functional experts in the organization. SOHO China case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats SOHO China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SOHO China are -
Shortening product life cycle
– it is one of the major threat that Soho Shiyi is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Soho Shiyi business can come under increasing regulations regarding data privacy, data security, etc.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Soho Shiyi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Soho Shiyi will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Environmental challenges
– Soho Shiyi needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Soho Shiyi can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Soho Shiyi in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Soho Shiyi needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Increasing wage structure of Soho Shiyi
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Soho Shiyi.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Soho Shiyi can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study SOHO China .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Soho Shiyi.
Consumer confidence and its impact on Soho Shiyi demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Soho Shiyi in the Global Business sector and impact the bottomline of the organization.
Weighted SWOT Analysis of SOHO China Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study SOHO China needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study SOHO China is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study SOHO China is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of SOHO China is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Soho Shiyi needs to make to build a sustainable competitive advantage.
